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Logistics has become a critical component for the agriculture and allied segments. Logistics in India is considered as the sunrise sector that is expected to grow multi-fold. With the ‘Infrastructure’ status, it will help this sector to be more competitive and bring in a lot more players with integrated service approach which would help Indian agriculture and food processing sectors enormously.
Recently, the government accorded infrastructure status to the logistics sector. It is expected that the move will help bring in more investments in to this sector and would also bring down overall logistics cost by 1 - 2%. Logistics costs in India are as high as 13-14 per cent of GDP when compared to 7-8 per cent in developed countries. High logistics costs nullifies the cost advantage for the Indian manufacturers/exporters/ producer at the global arena.
Further, it is promising to note that the government has appointed a Logistics division under the Ministry of Commerce for integrating the various sectors such as agriculture, food processing, and manufacturing of Logistics.
R Dinesh, Chairman, CII Institute of Logistics and Chairman for Sector Skill Council, said, “The logistics sector in India is still very fragmented and has suffered from lack of investments and a proper recognition. We, at CII, have been pursuing this with the Government at various levels and through various ministries for the last few years. We appreciate that the government has appointed logistics division for integrating the various sectors of Logistics.”
For agriculture and food processing sectors, the move would prove a great enabler and catalyst for efficiency and growth. According to an Assocham report, even marginal reductions in post-harvest losses of fruits and vegetables which are to the tune of about 25-30 per cent are bound to give better returns and improve farmers' level of incomes.The Report also points out that growth in food processing and simultaneous improvement in the development of logistics as value chain are of great importance to achieve favourable terms of trade for India's agriculture sector both in domestic and international markets.
“We expect the logistics sector, which already provides over 17 million jobs, to grow at even faster rate going forward and provide even higher employment opportunities than before,” added Dinesh.
What ‘Infrastructure’ status means for Logistics sector:
1. Modern Logistics assets needed for the economy in the post-GST era, will involve heavy capital investments with long gestation periods (~10-20 years) at current level of returns. Thus, there is an urgent need to facilitate the credit flow into the sector with longer tenures and reasonable interest rates
2. Infrastructure status for Logistics sector can result in an integrated planning of logistics infrastructure and better utilization of existing assets and resources with a focus on timely maintenance and upgradation
3. Physical infrastructure and transportation capacity related investments are crucial for enabling and promoting multimodal transport in the country
4. Infrastructure status will help in providing an easier access to institutional credit thereby reduces cost of borrowing for Logistics infrastructure
5. Infrastructure status will simplify the process of approval for construction of multimodal logistics (parks) facilities that includes both storage and transport infrastructure
6. It encourages market accountability through regulatory authority and can attract investments from debt and pension funds into recognized projects